Was 2013 one of Microsoft's worst years ever?

2013 was a year of big ups and downs for Microsoft -- ups like the purchase of Nokia and the Xbox launch, and downs like the continuing problems with Windows 8. Did the downs outstrip the ups, and was it one of Microsoft's worst years ever?

Perhaps the biggest downside was the continuing struggles of Windows 8. Although Windows 8 was released in 2012, it wasn't until 2013 that the scope of the operating system's problems came into focus. Consumers and enterprises spoke with a single voice: They didn't like it. In fact, Windows 8 was received so poorly that in a report IDC said that the decline of PC sales were accelerated by the operating system. Bob O'Donnell, IDC Program Vice President, Clients and Displays had this to say:

"At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market. While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices."

The year also saw what was essentially a crash in PC sales -- record declines never seen before. Gartner found that PC sales declined 10% in 2013, the worst drop ever recorded. Given that most of those PCs were Windows machines, Microsoft was hit far worse than its competitors.

Microsoft's launch of its Surface tablet line became a debacle in 2013. The tablets were released in 2012, but 2013 showed just how badly they were faring in the market. So few Windows RT tablets were sold that Microsoft was forced to take a $900 million writedown on unsold inventory. Sales of RT-based tablets were so poor that many partners, such as Asus among others, abandoned plans to manufacture them.

As for Windows Phone, it clawed ahead of BlackBerry in 2013, but that's not saying much. It's still stuck in the doldrums. The latest figures from Kantar Worldpanel ComTech show it at 4.7% in the U.S. and 2.7% in China, the two largest smartphone markets in the world. Although it's up to nearly 10% in the largest European Union countries, unless it makes headway either the U.S. or China, it's not likely to become successful. Dominic Sunnebo, strategic insight director at Kantar Worldpanel ComTech said:

"You don't have to conquer China and the US to win in the smartphone market, but you do need success in one of them. At the moment there are few signs of progress in either country for Windows Phone and momentum needs to be made soon before OS loyalty severely limits the available market."

Microsoft had other woes as well in 2013, including reports that it cooperated unduly with the NSA in privacy invasions.

Of course, not everything went badly. Office continued to dominate and sell like gangbusters, enterprise sales boomed, Microsoft opened more Microsoft retail stores, the new XBox sold well, and the company was reorganized along more logical lines.

In the biggest news, Steve Ballmer announced his retirement. Since then, Microsoft has shown a willingness to consider new ways of doing business, including possibly making Windows Phone and Windows RT available for free. So it's likely that 2014 will be a better year for Microsoft, possibly by a long shot.

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